Europe's Hands Tied on Power Supply

BloombergWind turbines, like these in Britain, may reduce Europe's thirst for gas.
LONDON — Western Europe may be able to insulate itself better against another gas supply cut next winter, but those countries hardest hit by the gas crisis will remain vulnerable.

The prime ministers of Ukraine and Russia reached a deal on Sunday that should restore gas supplies to Europe this week.

A previous price agreement, reached by the two premiers last October fell apart within days, and there is no guarantee that the gas row will not flare up again next winter.

There is little Europe can do about it before then.

Europe gets about a quarter of its gas from Russia and has not significantly reduced its reliance on the free flow of fuel across Ukraine since a feud between Moscow and Kiev briefly cut supplies in January 2006.

A few liquefied natural gas import terminals and new storage facilities, which could help top up winter supplies, are due to open this year, boosting security in time for next winter in the countries that built them.

But repeated delays and sluggish investment in alternative energy sources mean large parts of Europe will still be in trouble if Russia or Ukraine turns the taps off again.

"Are we going to be better off next winter? Yes, because there's some progress. But it is slow," said James Ball, president of Gas Strategies Consultants.

Storage has been the main defense for well-stocked countries like Germany and Italy against national energy supply crises over the last two weeks.

There is not enough of it in some of the countries most dependent on Russia, which has forced tens of thousands of people in Central and Eastern Europe to turn to electric heaters to keep warm and factories to reduce output.

Despite the 2006 supply cut, only two of the seven Central and Eastern European countries that Gas Strategies has analyzed have increased their storage capacity since 2005, and most of the new facilities due to open this year are also in Western Europe.

"These are the ones that are most exposed … and look at how little achievement there has been," Ball said. There has been a similar lack of investment in LNG import terminals in poorer countries with few alternatives to Russian gas, while countries in Central Europe rely on gas from their neighbors.

All projects expected to open over the next 12 months are in Western Europe, which apart from Italy has been relatively unshaken by the gas dispute.

The only firm project in the Balkans, one of the regions most affected by the two-week supply cuts, is the Adria LNG project in Croatia, which is not expected to open until at least 2012.

Hundreds of wind turbines to be installed this year could reduce Europe's thirst for gas slightly. No other type of power station can be built quickly enough to provide an alternative to gas-fired generation for next winter.